Who decides? The state or the individual?

This is a continuation of another discussion, but I'd like to start by addressing the basic philosophical point first. To do so, let's examine this situation:

Worker is looking for a job and Boss is looking to hire someone. We can assume that Worker, all things considered, would prefer to work for the highest wage and the fewest hours, whereas Boss, all things considered, would prefer to hire someone for the lowest wage and the most hours. Now, suppose also that the state is considering a law that both sets the minimum wage at which an employee may be paid as well as the maximum hours that an employee may work. Without the law in place, however, we can assume that Boss and Worker might negotiate a deal which would fall short of the law's minimum wage limit or exceed the law's maximum hour limit.

In this situation, who should make the decision regarding Worker's wages and hours: Worker and Boss, negotiating between themselves, or the state, through its minimum wage/maximum hour legislation?

The problem with your analogy--as I see it-- is that it assumes a level playing field, i.e, that the boss and the worker have equal leverage in negotiating the wage. That's a situation I just haven't seen very often.

0 Replies

fishin

1

Reply
Fri 13 Oct, 2006 10:23 am

Re: Who decides? The state or the individual?

joefromchicago wrote:

Without the law in place, however, we can assume that Boss and Worker might negotiate a deal which would fall short of the law's minimum wage limit or exceed the law's maximum hour limit.

How can we assume this? And why should we? We could just as easily assume that the worker and boss might negotiate a deal where the worker ends up getting paid well in excess of the minumum wage and working few, if any, hours.

Quote:

In this situation, who should make the decision regarding Worker's wages and hours: Worker and Boss, negotiating between themselves, or the state, through its minimum wage/maximum hour legislation?

In an ideal world the worker and boss should be negotiating their own deal.

*I'll post a Mea Culpa up front. I haven't yet read the prior thread but will go back and do so.*

0 Replies

joefromchicago

1

Reply
Fri 13 Oct, 2006 10:28 am

blacksmithn wrote:

The problem with your analogy--as I see it-- is that it assumes a level playing field, i.e, that the boss and the worker have equal leverage in negotiating the wage.

It assumes no such thing.

0 Replies

sozobe

1

Reply
Fri 13 Oct, 2006 10:32 am

Sure it does. Generally speaking, depending on the economy and the specific job and lots of other things, the potential employer holds more power than the potential employee. If the employee says "I want $8.00/ hour", it's easy for the employer to say "Pshaw. Next!" If the government says "You have to pay that guy $8.00/ hour," the employer must comply.

0 Replies

joefromchicago

1

Reply
Fri 13 Oct, 2006 10:38 am

Re: Who decides? The state or the individual?

fishin wrote:

joefromchicago wrote:

Without the law in place, however, we can assume that Boss and Worker might negotiate a deal which would fall short of the law's minimum wage limit or exceed the law's maximum hour limit.

How can we assume this?

For two reasons:
(1) Because it's my hypothetical, and I establish the assumptions; and
(2) Because I said that Boss and Worker might negotiate a deal which would fall short of the law's minimum wage limit or exceed the law's maximum hour limit. I didn't say that they would negotiate such a deal. After all, they might do just the opposite, so that possibility has already been taken into account. Given that, I'm not at all sure what point you're trying to make.

fishin wrote:

In an ideal world the worker and boss should be negotiating their own deal.

Why?

0 Replies

joefromchicago

1

Reply
Fri 13 Oct, 2006 10:49 am

sozobe wrote:

Sure it does. Generally speaking, depending on the economy and the specific job and lots of other things, the potential employer holds more power than the potential employee. If the employee says "I want $8.00/ hour", it's easy for the employer to say "Pshaw. Next!" If the government says "You have to pay that guy $8.00/ hour," the employer must comply.

I have provided no information about the respective bargaining positions of either Boss or Worker. You should, therefore, take into account the possibility that there is unequal bargaining power between the Boss and Worker.

0 Replies

fishin

1

Reply
Fri 13 Oct, 2006 11:00 am

Re: Who decides? The state or the individual?

joefromchicago wrote:

fishin wrote:

joefromchicago wrote:

Without the law in place, however, we can assume that Boss and Worker might negotiate a deal which would fall short of the law's minimum wage limit or exceed the law's maximum hour limit.

How can we assume this?

For two reasons:
(1) Because it's my hypothetical, and I establish the assumptions; and
(2) Because I said that Boss and Worker might negotiate a deal which would fall short of the law's minimum wage limit or exceed the law's maximum hour limit. I didn't say that they would negotiate such a deal. After all, they might do just the opposite, so that possibility has already been taken into account. Given that, I'm not at all sure what point you're trying to make.

The point I was making is that you have setup the wording of the assumptions so that they appear skewed to acheive a pre-determined result. There isn't much point in exploring philosophical possibilities when the result is predetermined.

Quote:

fishin wrote:

In an ideal world the worker and boss should be negotiating their own deal.

Why?

Because in my ideal world the first preference is a world where both the worker and the employer are free to operate with minimum outside interference. I generally operate from a position that government regualtion should only be put in place when absolutely necessry - a last recourse intead of a first recourse.

0 Replies

fishin

1

Reply
Fri 13 Oct, 2006 11:04 am

sozobe wrote:

Sure it does. Generally speaking, depending on the economy and the specific job and lots of other things, the potential employer holds more power than the potential employee. If the employee says "I want $8.00/ hour", it's easy for the employer to say "Pshaw. Next!" If the government says "You have to pay that guy $8.00/ hour," the employer must comply.

The employer doens't have to comply. They can not hire anyone and leave the position unfilled or they can eliminate the position entirely.

0 Replies

sozobe

1

Reply
Fri 13 Oct, 2006 11:26 am

True.

I do actually agree with the last recourse bit, too.

0 Replies

Phoenix32890

1

Reply
Fri 13 Oct, 2006 11:40 am

I agree with the "last recourse". Personally, I believe that the government needs to keep its nose out of the marketplace. Let the laws of supply and demand take over, and let employees and employers make their own deals.

0 Replies

jpinMilwaukee

1

Reply
Fri 13 Oct, 2006 11:51 am

When the price of labor goes up, the prices go up. Those that benefited from the minimum wage increase, gain little or nothing because prices also increase. Those that did not benefit from a minimum wage increase (let's say they are already making $10 an hour when minimum wage was increased to $8) actually lose buying power. Their wages stay the same, but are now paying more for commodities.

I think there is a false assumption among some minimum wage advocates that the increase of wages comes out of the pockets of the business. In reality the business still get theirs and simply passes on the increase to the consumers.

0 Replies

joefromchicago

1

Reply
Fri 13 Oct, 2006 01:04 pm

Re: Who decides? The state or the individual?

fishin wrote:

Because in my ideal world the first preference is a world where both the worker and the employer are free to operate with minimum outside interference.

Phoenix32890 wrote:

Personally, I believe that the government needs to keep its nose out of the marketplace. Let the laws of supply and demand take over, and let employees and employers make their own deals.

Why is that? Is it because people, in general, make the best decisions for themselves when they are acting in their own interest? Or because freedom to contract is a higher-order good than other goods, such as some notion of "social justice" or "fairness?" Or is there some other reason?

0 Replies

fishin

1

Reply
Fri 13 Oct, 2006 02:39 pm

Re: Who decides? The state or the individual?

joefromchicago wrote:

Why is that? Is it because people, in general, make the best decisions for themselves when they are acting in their own interest? Or because freedom to contract is a higher-order good than other goods, such as some notion of "social justice" or "fairness?" Or is there some other reason?

I guess I see the freedom to contract (as with other freedoms/liberties...) as a part of "social justice" and "fairness" so yeah, in a way I do see it as a higher-order good. IMO, for any choice to be "just" or "fair" there is an essential element of having the freedom to make that choice or not.

I can't comment on whether or not people generally make the best decisions for themselves or not. I haven't thought about it much and would need some time to ponder that. I found the following on the BLS WWW site and think it fits in here: "According to Current Population Survey estimates for 2003, some 72.9 million American workers were paid at hourly rates, representing 59.6 percent of all wage and salary workers. Of those paid by the hour, 545,000 were reported as earning exactly $5.15, the prevailing Federal minimum wage, and another 1.6 million were reported with wages below the minimum. Together, these 2.1 million workers with wages at or below the minimum made up 2.9 percent of all hourly-paid workers.". Now that was for 2003 but it tells me that 97.1% of those that are employed us have been able to negotiate deals that get paid better than minimum wage.

Another thought that ties in here; I think that people need the opportunity to fail as well as the opportunity to succeed. Occasional failures in life teach us lessons and keep the fool hardy from taking excessive risk. Creating a system where personal risk is minimized or eliminated encourages foolish endeavors. For example, You might enjoy and have studied crytpozoology and may desire to live in Pocatello, ID but your exercise of free will to move to Pocatello doesn't create an obligation on my part (or the rest of society's) to provide you with a well-paid job (or any job for that matter) in cryptozoology there.

0 Replies

Thomas

1

Reply
Fri 13 Oct, 2006 02:45 pm

Re: Who decides? The state or the individual?

fishin wrote:

joefromchicago wrote:

Without the law in place, however, we can assume that Boss and Worker might negotiate a deal which would fall short of the law's minimum wage limit or exceed the law's maximum hour limit.

How can we assume this? And why should we?

Because if you don't assume this, you don't have a conflict to philosophize about.

0 Replies

Thomas

1

Reply
Fri 13 Oct, 2006 03:08 pm

Re: Who decides? The state or the individual?

joefromchicago wrote:

In this situation, who should make the decision regarding Worker's wages and hours: Worker and Boss, negotiating between themselves, or the state, through its minimum wage/maximum hour legislation?

Worker and boss. The rationale depends on whether you ask the natral rights-libertarian in me or the utilitarian in me. I switch between both personalities, depending on which side of the bed I got up on this morning.

For the natural rights libertarian in me, there isn't much of an argument to make. In this capacity, I believe that people have a fundamental right to liberty. This means they can do everything they want as long as it doesn't interfere with the equal rights of others. If Jack chooses to offer Joe a job for $5/hour, and Joe chooses to accept, that's a matter between consenting grown-ups who know what they're doing. The same moral principle that prohibits the government from messing with the sex life of consenting grown-ups, also prohibits it from messing with the economic life of consenting grown-ups.

The utilitarian in me is somewhat more flexible. If you do an economics 101 welfare analysis, you find that, depending on worker's and boss's utility functions, the government can increase the general welfare with moderate and carefully calibrated minimum wage laws. I'm still not a big fan of government-set minimum wages though, for three reasons. 1) Employers and employees know more about the job they contract about than the govenment does, the government is in an inferior position to tell what the wage "ought to" be. 2) Alternatives such as the Earned Income Tax Credit achieve the same advantages with less severe side effects, 3) The government itself is properly thought of as a political market, not an omniscient, benevolent philosopher king. Hence, even if the government can incease the general welfare with a carefully calibrated minimum wage, that doesn't mean the minimum wage it actually sets will be carefully calibrated.

So as a libertarian, my answer is worker and boss. As a utilitarian, my answer is still worker and boss, but only 99% of the time.

0 Replies

Setanta

1

Reply
Fri 13 Oct, 2006 05:40 pm

This reminds me of a controversy between Thomas and me in another thread, which had already lead me to canvass this subject, although not specifically in strictly the terms of wages and hours. If one is restricted to only discussing whether or not the state has a right to intervene in matters of wages and hours, then i agree somewhat with Fishin' that the discussion is going to be chanelled into a simple yes or no, with an tendancy to to suggest that employer and employee are both equivalent free agents in such a negotiation--but how can one explain why one thinks the state should be able to intervene if one isn't allowed to point out, as Soz has, that there is never a level playing field in such negotiations?

I'll deal with that first. Employees want to work to get the wherewithal to make the mortgage payments, or pay the rent, to buy cheap clothing and household furnishings at Walmart, and to bring home the bacon and beans. But employers represent capital, or the well-paid representatives of the interests of capital, and neither the capitalist nor his/her well-paid agents are paying ruinous mortgage rates or too high rent, buying cheap goods at Walmart, or dining on bacon and beans. The propesctive employee will have at best no more than several options for employment, whereas the employer will often have a buyer's market on labor--if you don't like the terms, tough, there's thousands more willing to take this work.

Obviously, it is more complex than that--but basically, people who offer employment have the advantages of capital, even if only loaned, while the employee has an absolute need for the employment to meet their ordinary expenses. Employers dissatisfied with labor's demands are not only often in a position to withstand a strike for a long period of time, but have historically often locked-out employees whose demands came to be seen by them as insufferable. Certainly, there are many times when labor is a seller's market, because of a greater demand for labor (at certain times in certain industries) than there are potential employees willing to work for the wages and during the hours offered. So one certainly cannot realistically explain why one would favor state intervention without taking notice of conditions which allow capital to take advantage of a buyer's market in labor.

*****************************************

In the American Declaration of Independence, reference is made to unalienable rights. It isn't my intent to divert the discussion into whether or not there are such rights (i do believe this is, however, an ancient concept), but want to look at the last two clauses of the succeeding sentence: . . . governments are instituted among men, deriving their just powers from the consent of the governed. Whether or not one considers this philosophically true, it is certainly pragmatically true, as in extremity, people who feel that an onerous government is being imposed on them may well, and historically often have done, rebel. Therefore, in my never humble opinion, one need examine this no further than to say that the people in the aggregate, as a society, are free to institute a government which the majority will intend to regulate the relations between capital and labor.

One would then asky why would a people wish to do so? There is, of course, Soz's argument that capital exercises a power in negotiation denied to the prospective employee. If an employer's terms were so obnoxious to the general run of applicants that they could not find sufficient labor, the mere fact that capital already implies a sufficiency and a surpolus means that the capitalist can afford to defer or suspend operations while waiting to secure sufficient willing labor. The prospective employee, however, needs to be employed to attain a sufficiency, never mind a surplus. That is at the heart of the fact that capital always has a negotiating advantage over labor--capitalists obviously already have sufficient means, and can afford to reject those who will not come to terms--while prospective labor will be driven by necessity to take unsatisfactory terms, if nothing better offers. Businesses which are willing to endure a high turn-over of employees are common, and are, apparently, based upon a decision by capital in such examples that getting the most labor for the least outlay is the paramount objective, and a philosophical view that this will meet their needs better than the putative advantages of a happy and well-paid, while not over-worked, labor force.

***********************************

I agree that governments are instituted among men (and women) to secure "blessings" to those instituting, or tolerating the continuance, of said governments. On that basis alone, i consider that the state has the right to regulate labor and capital relations. But there is also a very practical reason to understand that the regulation of labor relations by government, just as is the case with the regulation of commerce, works to the advantage of society at large--and i will address that in a separate post.

0 Replies

Setanta

1

Reply
Fri 13 Oct, 2006 06:48 pm

The discussion (or controversy) which Thomas and i had which lead me to think about this regarded John Mill. Mill held that, so long as there were no deceit being practiced, labor should be free to accept employment on any terms, and in any working conditions. I disagree, and for more reasons than the simple one i give above about the powers of government deriving from the consent of the governed (even when such "consent" is only a tacit acceptance of the status quo).

Our friend JP from Wisconsin has written this:

Quote:

When the price of labor goes up, the prices go up. Those that benefited from the minimum wage increase, gain little or nothing because prices also increase. Those that did not benefit from a minimum wage increase (let's say they are already making $10 an hour when minimum wage was increased to $8) actually lose buying power. Their wages stay the same, but are now paying more for commodities.

I think there is a false assumption among some minimum wage advocates that the increase of wages comes out of the pockets of the business. In reality the business still get theirs and simply passes on the increase to the consumers.

This represents some simplistic and rather naive notions of how consumer economies work. Implementing a minimum wage does not necessarily make the cost of consumer goods increase across the board and without exception--that ignores not only cheaper foreign imports (consider how many American businesses have moved their operations overseas since the Reagan era to take advantage of lower wage labor forces and less onerous employment conditions standards), but it also ignores that there are a host of means by which capital can compete effectively other than keeping down labor costs.

One obvious means is economies of scale. If you are manufacturing whozits, and you need 5,000 widgets a month to produce them, you can use the power of capital to not only reduce your costs, but increase your volume. If, instead of buying 5,000 widgets a month, you use your capital (or borrow some) to purchase 60,000 widgets at the beginning of the year, you can get a cost reduction on the production of whozits without needing lower labor costs. Not only can this help your bottom line, but you can put a portion of the increase of profit from the reduction of costs into a reduction of the price to the consumer, and beat the competition with volume sales, which can mean that you actually make more money by reducing the price to the end-user.

Vested interests also help. If you think your outlay for widgets is too high, and you have (or can borrow) sufficient capital, you can start operations to manufacture widgets yourself, and again reduce the costs of the whozits you sell, and increase your volume by undercutting the price charged by the competition.

Cutting managerial dead wood can help, as well. Many corporations expend incredibly extravagent amounts on management, and as often as not, because the members of the board feel no empathy for labor, but recognize management as members of the same "club." When Lee Iacoca convinced Chrysler workers to accept a pay cut to help keep the company afloat, he got more than $11,000,000 in compensation that same year, and that without consideration of stock options available to him. Now, one could allege that his superior skills as a manager made it worth the price--however, i would be unconvinced, and suggest that just about any new broom could have swept as clean, and at a fraction of that bill.

Effective control of packaging and marketing costs can help a great deal, as well. What are known in the United States as generics offer products of equivalent or near equivalent quality at a much reduced price because the cost of expensive packaging, marketing and advertising is removed from the product price. Once again, that is a situation in which volume sales can mean that you can actually make more money by offering products at a lower price, but selling in volume.

The bottom line in consumer society economics is volume sales. Ceratinly, advertising and marketing can help convince the population that they need $300 running shoes. But the guy who sells you $20 Chinese-made sneakers will beat you to death on volume, and probably join your country club--and if he has the price of admission, he'll be just as welcome there.

**************************************

Edward Gibbon in his Decline and Fall of the Roman Empire, despite his marvelous scholarship, started from a flawed premise. He assumed that the historical record showed that Roman imperial administration in the west collapsed because of "moral decay" among the sybaritic ruling class at Rome. He demonstrated that he understood consumer economies no better than did the Romans themselves. In the west, from the earliest days of the Republican Empire, members of the Senatorial class had consistently engrossed public lands (gained by conquest) to their own ends--this is about half of the source of the history of politics in the Republic. The eastern portion of the empire was acquired at about the time that the Republic was collapsing. Although Syria and Palestine were conquered, almost all of Anatolia was bequeathed to the Empire, or was obtained by the willing surrender of the Ionic city states on the western and northern coasts of Anatolia. There, the land taken continued to be held and worked by the peasants who were on the land at the time that it entered the Empire.

In the west, the small holder was increasingly squeezed out. Patricians set up huge slave-driven farms known as latifundia. The rise of the latifundia was a complex affair, which i won't go into. Suffice it to say that the latifundia--largely found in southern Itally (conquered from Greek colonizers) Sicily, Egypt and "Africa" (Africa was a province we would recognize as Lybia and Tunisia) and in southern Spain. They produced cattle, grain, wine grapes, olive oil and wool. The class of Equites or "Knights" was the middle class created by the Republican Empire from among ambitious and capable commoners (originally recommended by exemplary military service, it was later thrown open to any bright, young Plebeians). The Equites became the farm managers, agents and distributors of the agricultural production of latifundia. The Patricians who owned the lands (often by inheritance) remained at Rome and lead the luxurious lives which lead Gibbon to condemn them as "morally corrupt." But the problem with the Patricians (and Gibbon as well) was that they did not recognize the concept of a consumer society. For as long as the Empire continued to expand, they had markets for their production. The Equites helped to create vested interests for them, by setting up huge slave-run bakeries for the grain they grew, weaving sweatshops to turn their wool into cloth and garments (slave operated, once again) and wineries to use the grapes they grew. In the process, the traditional Roman small holder (so central to their social myth about their own "simple" virtues) was driven out of business. The manufacture with slave labor of pottery, cloth and wine drove the small craftsmen out of business.

Iulius Caesar was smart enough to conceive of the idea of panem et circenses--bread and circuses. The Roman citizen was entitled to subsidized grain, and later bread, as long as he was resident in Rome and a specified surrounding area. The circus so named because of the circle around which chariots were raced, and was later expanded to include gladitorial contests, which Caesar virtually created himself from an obscure Etruscan custom which had previously been only occasionally and privately practiced at Patrician funerals. Now the commons of Rome knew they'd have enough (or almost enough) to eat, and that they'd have free public entertainment. This, of course, left the newly created emperors and their Patrician cronies free to pursue their own preferred entertainments.

Gibbon chooses the Antonine period to being his narrative, thinking it represented the height of moral corruption of Roman society in the west, and that it was all downhill from there. However, what it more accurate represented was the period in which the contraction of the Empire began. The last Antonine emperor was Commodus. In about 180 CE he gave up campaigning in Germany and returned to Rome, leaving the frontier to officers who were as little interested in fight the "barbarians" as he was, but who were not free to leave. When he died in 193, he was succeeded by one of Rome's last successful military Emperors, Septimius Severus. Under Severus, the Empire reached its greatest extent. But Severus took the imperial throne by other means than simply conquest. Taking the ancient practice by Roman military men to took the throne of giving bonuses to the Praetorian Guard, he expaned it to give a huge bonus in specie (coins, ostensibly of gold or silver) to all the members of all the legions. To accomplish this, he debased the currency--he added lead to the gold and silver so as to be able to mint more money. This lead to an economic consequence which neither he nor Gibbon understood--runaway inflation.

From the end of the Severid dynasty (with the death of the grandson of Septimius Severus) the Empire began to contract. Money was already worth less and less, and inflation was high and nearly constant. This made almost no impression upon the Patricians who benefited from the latifundia--not right away. But the economic collapse of the Empire in the west was less than two centuries away. Quite literally, the latifundia were killing the goose that laid the golden (or leaden) egg. When the Empire ceased to expand, the Patricians began to lose the markets for the goods produced on the latifundia. The population of Rome had swelled and continued to swell with Roman citizens (less than 25% of the population of "free" men in Italy, it was nevertheless a considerable number, even after you subtract the roughly 50% of the entire population who were slaves). These people were eating subsidized food, and were fed directly out of the Imperial coffers in hard times, which were increasingly common. The latifundia had served to drive out of business the very people to whom the Patricians could have sold their goods.

In the east, the terraine of Greece was not suitable to large-scale farming such as was done with the latifundia--and most of the land remained in the hands of the freeholders of the commons who had held it for millenia. In Anatolia, the land had been bequeated to the Empire or surrendered without prejudice, and the small holders continued to thrive there--they could compete with the production of the latifundia in southern Italy, Africa and Spain because they could carry their goods to local markets and undercut the prices of the latifundia production, to which the costs of transport and storage was necessarily added. The Roman Empire in the west did not "fall" with the sack of Rome in 410 CE--but it had already withered, and would disappear entirely when the Lombards invaded. In the east, the economy remained healthy, and the society at Constantinople (formerly the Greek Byzantium) retained the same commercial basis it had thrived on as a trading entrepot before Constantine had ever seen it.

There are many reasons why the Roman empire lost France, Spain, Italy and Africa to the German "barbarians." The economic cause was not the only one, but it was nevertheless crucially significant. Consumer societies only function if there are lots of consumers. People who earn the minimum wage are not large scale consumers, but there are literally tens of millions of them. Without a minimum wage, it is doubtful if they could often even support themselves, let alone buy all the shiny, new goods the capitalists want to sell them.

0 Replies

edgarblythe

1

Reply
Fri 13 Oct, 2006 07:42 pm

I have not read the thread. Now, it's pretty long and so I doubt I will. I just believe that if bosses can make any deal with workers they wish, the workers ought to have unrestricted rights to unionize. The place of the government ought to be to legislate out corruption on the part of both parties.

0 Replies

Thomas

1

Reply
Sat 14 Oct, 2006 07:01 am

edgarblythe wrote:

I have not read the thread. Now, it's pretty long and so I doubt I will. I just believe that if bosses can make any deal with workers they wish, the workers ought to have unrestricted rights to unionize. The place of the government ought to be to legislate out corruption on the part of both parties.

That's fine with me. Each worker has the right to bargain collectively if he wants to. Conversely, each employer has the equal right not to bargain with a collective if he doesn't want to. If this means that some workers end up jobless and some employers workerless, that's inexpedient. But it's not a deep problem for me in terms of rights.